Abstract

Climate change has become one of the most important issues for the sustainable development of social well-being. China has made great efforts in reducing CO2 emissions and promoting clean energy. Pilot Emission Trading Systems (ETSs) have been launched in two provinces and five cities in China, and a national level ETS will be implemented in the third quarter of 2017, with preparations for China’s national ETS now well under way. In the meantime, a new round of China’s electric power system reform has entered the implementation stage. Policy variables from both electricity and emission markets will impose potential risks on the operation of generation companies (GenCos). Under this situation, by selecting key variables in each domain, this paper analyzes the combined effects of different allowance allocation methods and power dispatching models on power system emission. Key parameters are set based on a provincial power system in China, and the case studies are conducted based on dynamic simulation platform for macro-energy systems (DSMES) software developed by the authors. The selected power dispatching models include planned dispatch, energy saving power generation dispatch and economic dispatch. The selected initial allowance allocation methods in the emission market include the grandfathering method based on historical emissions and the benchmarking method based on actual output. Based on the simulation results and discussions, several policy implications are highlighted to help to design an effective emission market in China.